"The so-called recession"

David Cameron is “unimpressed” with Lord Young’s talk of the “so-called recession.” However, there is much truth in what he says. For example:Claim: 100,000 job losses are within “the margin of error” in the context of the 30 million-strong job market.Fact: The ONS estimates that the sampling variability of its estimate of employment is 152,000 (p12 of this pdf). One-nil to Young.Claim: “Most people with a mortgage who were paying a lot of money each month, suddenly started paying very little each month. That could make three, four, five, six hundred pounds a month difference.”Fact: Since December 2007, the average standard variable mortgage rate has dropped from 7.68% to 3.93%. With the average mortgage just over £100,000 (11.1 million mortgages with total debt of £1.2 trillion) this implies a monthly saving of around £350. Some (those on fixed rates) will have benefited less, others (some tracker mortgages) more. Two-nil to Young.Claim: “For the vast majority of people in the country today they have never had it so good.”Fact: Only a minority of people have mortgages. Their gains, then, are offset by three groups of losers. First and most obviously, there are those who have lost their jobs; a net 876,000 full-time jobs have gone since the cyclical peak. Secondly, there are workers generally. Since December 2007, the average worker has suffered a cut in real wages: average earnings have risen 3.7% since then but the constant tax CPI has risen 7.6%. Within, this, though, millions would have done better. Thirdly, there are savers who have suffered lower interest income and higher prices.Net, then, I suspect Young is wrong here. So, I score it 2-1. By the low bar that is politicians’ standards in such things, this isn’t too bad. So why is he getting stick? Because he’s drawn attention to some inconvenient facts.1. We are not all in this together. The key fact about the recession is the variability of experience, from the big mortgagee who’s saved thousands at one extreme to the man who’s lost his job at the other.2. This variability is largely due to luck. The big borrower who’s saved thousands doesn’t deserve this good fortune. Nor do the savers who have lost out deserve their bad luck, nor the workers who have been sacked. This might seem trivially true, but it undermines rightists ideas that individuals are in control of their economic fate, that wealth is due to hard work and unemployment to workshyness. It also draws attention to the possibility that the pain of recessions might be mitigated by better institutions for pooling risk.So, if I were Cameron, I too would be unimpressed by Young’s remarks. There’s no place in politics for the truth.

Related

Canadian jobs data released on Friday shows that despite the numbers beating expectations, the economy is still struggling to recover despite a strengthening U.S. recovery, economists say.
Although Statistics Canada said the economy created a net 25,800 jobs in May, all of them were part-time. Full-time jobs dropped by 29,100, bringing the two-month loss to a round 60,000 positions.

As Dennis Gartman reported in The Gartman Letter last Thursday, here's how the BLS describes in a Technical Note how sampling error affects the monthly estimates of changes in nonfarm employment levels (emphasis added):

Welcome to the kaleidoscopic economy, where you can see a host of different views on whether the growth is picking up, all at one time. Today's jobs report did little to clear things up. The BLS said we added 288,000 nonfarm payrolls in April — well above estimates — and that the unemployment rate fell to 6.3%.

OTTAWA — Canada’s employment landscape shifted dramatically on Friday, as Statistic Canada corrected a “human error” in its Labour Force Survey for July that resulted in a new estimated gain of nearly 42,000 jobs for that month compared to an original tally of just 200 addition positions.
The federal agency also took the extraordinary step of issuing a statement clarifying how the error occurred and what steps have been to taken to avoid a similar problem occurring.
This was an isolated incident

A recent consumer survey found that 41% of respondents had less than $500 in savings available on short notice. And the more comprehensive Survey of Consumer Finances released by the Federal Reserve in June calculated that only 52% of American families are earning more than they spend – that’s the lowest figure in 20 years. Moreover, the Fed found that fewer than 40% of families save money on a regular basis (as opposed to putting away a year-end bonus, say). So one has to wonder, is there a reason so many people are failing to save?

There’s one element of Cameron’s speech on immigration I want to quibble with. (Actually, there are loads, but I'll keep it brief.) It’s this:
Migrants are filling gaps in the labour market left wide open by a welfare system that for years has paid British people not to work. That's where the blame lies - at the door of our woeful welfare system

A little more on the ONS's defence of its numbers against criticism by the likes of Goldman Sachs, whose chief economist, Jim O'Neill I recently interviewed for the Today programme and other BBC outlets. I wrote up the Goldman Sachs analysis of the figures on the day the first estimate came out ("First draft of UK economic history").